What Pharmacy Benefit Designers Need to Know About Perception and Reality: Never Forget the Elephant in the Pharmacy

Tell the patient that the pill contains nothing but sugar, and there is no pain relief; tell him (falsely) that it contains a powerful analgesic, and the perceived level of pain falls. [Defendants insist that a] product that confers this benefit cannot be excluded from the market ... just because they told the lies necessary to bring the effect about ... [But] Doctor Dulcamara was a charlatan who harmed most of his customers even though Nemorino gets the girl at the end of Donizetti’s “L’Elisir d’Amore.”1

20-minute sessions, n = 88), or (3) an "augmented" condition consisting of the "sham acupuncture" plus a "warm, empathetic, and confident patient-practitioner relationship" (45 minutes at each "acupuncture" session, n = 87). Warmth and confidence were introduced into the augmented condition with statements like "I can understand how difficult IBS must be for you," and "I have had much positive experience treating IBS …," as well as 20-second periods of "thoughtful silence while feeling the pulse or pondering the treatment plan." All study participants (including those assigned to the waiting-list arm) received assessments at baseline, 3 weeks, and 6 weeks. At the 3-week follow-up, the proportions of patients reporting "adequate improvement in your IBS symptoms" were 28% in the waiting-list arm, 44% in the sham acupuncture arm, and 62% in the augmented (sham acupuncture plus interaction) arm. Similar trends in global improvement scale, symptom severity score, and quality-of-life measurement were noted. Findings were also similar at 6 weeks for a subgroup of patients randomized to continue with placebo treatment after the 3-week marker. 3 Similar findings were observed by Waber and colleagues when they conducted a randomized trial, published as a letter in JAMA in March 2008, to assess the effects of a medication's price on perceptions of its efficacy. 4 Study authors paid 82 healthy volunteers $30 to participate in the trial, telling study subjects that they would be testing a new opioid analgesic that was "similar to codeine with faster onset time." One half of the sample was told that the drug was priced at $2.50 per pill; the other half was told, without explanation, that the drug had been discounted to $0.10 per pill. Pain was induced by electric shocks to the wrist at various intensity levels, pre-calibrated according to each participant's pain tolerance, and rated by participants using a visual analog scale (range from "no pain at all" to "the worst pain imaginable"). Pain reduction rates, measured by change in mean pain scores, were 85.4% in the regular-price group and 61.0% in the discount-price group (P = 0.02). For a subgroup analysis of the most painful shocks (50th percentile and up, again calibrated to each subject), pain relief rates were 80.5% and 56.1% for the regular-price and discount-price groups, respectively (P = 0.03).
Waber et al.'s findings suggested that simply believing a drug to be higher in price results in a perception of better efficacyeven if that "drug" is just a placebo pill. Study authors posited that their results help explain the popularity of higher-cost prescription drugs over lower-cost equivalent options, such as generic medications. 4 Additionally, they suggested that more effective "quality cues" in communicating with patients, such as "de-emphasizing" features that would detract from a drug's perceived quality (e.g., lower price, generic status), might help to improve patient satisfaction with lower-cost options.
To those working routinely with health plan members, Waber et al.'s quantitative findings probably confirm anecdotal experience with the sometimes perplexing economic behavior of patients making medication purchasing decisions. For example, Fairman and Curtiss's editorial in the September 2007 issue of JMCP recounted the story of Ray Lindell, an elderly Arizona man who traveled more than 4 hours by car to purchase brand-name Valium from a Mexican pharmacy, only to be arrested and spend 8 weeks in a Mexican prison on charges of illegally purchasing narcotics-all because his wife believed that the generic anxiolytics promoted by her insurance company's new mandatory generic substitution policy were less effective than brandname products. 5 That editorial suggested that the "elephant in the pharmacy"-an important challenge receiving insufficient attention in the managed care industry-was how to encourage patients to make more evidence-based decisions when purchasing prescription drugs.
Translating the "elephant in the pharmacy" challenge into the language of economists, health care policy should encourage patients and members to value what is objectively valuable (i.e., healthy and cost-effective behaviors and treatments, such as full compliance with chronic drug therapy or using a generic medication when appropriate), and devalue what is clinically or economically wasteful (i.e., behaviors and treatments that are harmful or produce unacceptably low value relative to their cost, such as non-compliance with an antihypertensive drug in uncontrolled hypertension). Yet the question of how best to accomplish this goal is far from straightforward because it is, at its heart, a question of how human beings judge value. Put simply, to make health care policy that encourages use of objectively valuable options, we must first understand perceived value, that is, what health plan members value and why.

How Human Beings Determine Value-What Psychologists Know
Questions about cost and value are becoming particularly important in managed care policy now, as the debate over financing and structuring the health care system becomes increasingly prominent. Proponents of reducing out-of-pocket (OOP) cost for important preventive treatments, including chronic disease medications (e.g., statins, antihypertensives, antidiabetics), argue that tailoring copayments according to clinical value (i.e., lower copayments for higher-value services) will "increase use of the highly valued services and lower use of less valued ones, guaranteeing more health per dollar spent." 6 Underlying this optimistic view is a fundamental assumption of economic "rationality;" that is, it is assumed that demand for chronic medications will be elastic (responsive to price change) because patients will tend to act in their own economic self-interest. But for patients to engage in economically rational (price-sensitive) behavior, requires that they view lower cost as a positive attribute that connotes better value for the money spent.
Unfortunately, information about how human beings ascribe value to objects and events, although well studied by psychologists for some 6 decades, has gone largely unnoticed in the health care industry's current debates about treatment adherence and cost sharing. Evidence of patients' sometimes puzzling behavior when it comes to purchasing medications would come as no surprise to those familiar with psychological studies of cost and value. The seemingly intuitive assumption that lowering prices for health care services will increase the use of those services is largely, although not completely, inconsistent with evidence from psychological experiments conducted over many decades.

From Simplistic to More Realistic: How Humans Value What They Have Already Paid for-Cognitive Dissonance Theory
The first effort to explain the relationship between cost and value, associative theory, was the prevailing view in the 1950s 7 and is closely analogous to the assumption of economic rationality underlying today's copayment reduction proposals. Associative theory posited a simple and economically rational inverse relationship between price and consumption: if prices go up, perceived value relative to cost, and therefore consumption, will go down. But beginning in 1957, associative theory was challenged by a competing and ultimately much better supported view. According to that view, known as "cognitive dissonance theory," humans who are required to pay a high price for something will subsequently (i.e., after the price has been paid) value it highly to avoid a cognitive contradiction between the price that they have already paid and the perception of what they've paid for. 7,8 The earliest test of cognitive dissonance theory, an elegant and now classic experiment published in 1959, recruited 63 college student volunteers to participate in what they were told would be a series of group discussions on the psychology of sex. 8 Unbeknownst to the subjects, they had been randomly assigned into 3 groups (n = 21 in each group): (1) no group initiation; (2) a "mild" initiation, consisting of reading titillating but not obscene words aloud; and (3) a "severe" (by 1950s standards) initiation, consisting of reading a list of obscene words aloud. Words were read only in the presence of the investigator; there was no actual group interaction at all (and, in fact, there was actually no group). Following the initiation condition, all 63 volunteers listened to what they were told was the discussion group in live action (in reality, actors were used and the "live discussion" had been pre-scripted and tape-recorded) and then were asked to rate the group.
Study results fully supported cognitive dissonance theory. Subjects who had been randomly assigned to undergo a severe initiation in advance of hearing the group's "discussion" rated the group more highly than did either the mild initiation or no initiation groups. For example, the quality of the discussion, which had been pre-scripted to be "as dull and banal as possible … one of the most worthless and uninteresting discussions imaginable," according to study authors, was rated by study subjects on a scale of 0 to 120. Mean ratings were 97.6 for the severe initiation group, 81.8 for the mild initiation group (P < 0.02 for severe vs. mild), and 80.2 for the control group (P < 0.001 for severe vs. control). 8 The lively debate that ensued after the initial promulgation of cognitive dissonance theory is widely recognized as a hallmark in the field of social psychology 9,10 for a reason that should sound familiar to anyone currently engaged in health care benefit design. Specifically, the debate raised the fundamental question of whether human beings passively respond to external stimuli (associative view) or actively engage in cognitive processes about their choices (cognitive dissonance view). 9,10 Like Waber et al.'s recent study suggesting that higher-priced drugs are perceived as more valuable just because they cost more, 4 the psychological experiments of some 40 to 50 years ago began to suggest that active, not entirely rational, cognitive processes affect human purchasing behavior.
For example, a series of experiments published in 1969 provided additional support for cognitive dissonance theory in an assessment of the "introductory low price offer," in which an initially low selling price is followed by a return to pricing at normal levels. 11 Cognitive dissonance theory predicts that this intuitively appealing strategy will ultimately result in fewer sales because "the higher the price a person initially pays for a product, the more he will come to like it." 11 To test the effect of low introductory pricing, Doob et al. randomized chain discount stores to sell identical new store-brand products using either (1) initially discounted pricing for 1 to 3 weeks depending on the product, followed by a return to the normal price, or (2) normal undiscounted pricing throughout a 20-week study period. Store managers were unaware of the experimental conditions. Products priced at normal price throughout the study exhibited a steadily growing sales trend, described as "brand loyalty" by the study authors. Products priced initially at discount exhibited higher initial sales, followed by either a drop in sales or a reduced upward trend after the price increase. The initially higher sales volume for the discounted products was not enough to offset the steady climb in sales for the normally priced products. Thus, higher initial pricing was associated with significantly higher long-term sales volume. 11

Increasing Realism Through Personal Equity-comparison and Signaling Theories: The Role of Expectations in Determining Perceived Value
In discussing their low introductory price study, Doob et al. pointed out that a phenomenon other than cognitive dissonance could have explained their results. If customers seeing the introductory price began to identify the product as a low-cost option, the increase to the normal price might have been viewed as What Pharmacy Benefit Designers Need to Know About Perception and Reality: Never Forget the Elephant in the Pharmacy "overpricing," prompting product discontinuation. 11 In raising this possibility, the authors were introducing the notion of the importance of expectations in the value attribution process.
The importance of setting expectations lies at the heart of a theory of cost and value that is more complex than either associative theory or cognitive dissonance theory-personal equity-comparison theory (PECT). According to PECT, humans assess the value of phenomena (e.g., objects, events, actions) in a constantly evolving process of comparison between expectations, cost, and outcomes. PECT is generally consistent with cognitive dissonance theory in that it associates moderately high costs with better expected (and therefore perceived) outcomes than minimal costs. 9 However, PECT accounts for complexities in human cognition not addressed by cognitive dissonance theory.
One of the complexities addressed by PECT and relevant to the setting of health care cost-sharing levels is the "ceiling effect." If the cost paid by an individual is so high that it generates an expectation that cannot possibly be met given the actual value of the outcome, the individual will tend to separate or "contrast" the outcome from the cost, thereby devaluing the expected outcome. Thus, the relationship between cost and perceived value is posited to be curvilinear: phenomena with a moderate cost will be perceived as more appealing than phenomena with a low cost, but if the cost is too high, the perceived value may decline. 9 Another factor affecting expectations and, therefore, value is history or reputation; for example, when an experience that would normally result in devaluation occurs (e.g., a distressing interaction with a close friend or a bad meal in a restaurant that usually serves great food), a person with very positive past experiences with a person or group will tend to develop a "compensatory expectation," the belief that eventually a positive outcome will come about in the future. Finally, the salience of cost is important; to cause a change in perceived value, a cost must be of sufficient magnitude to be noticeable. 9,12 PECT was tested and well-supported in a series of 4 experiments published in 1993. 12 All 4 experiments were conducted with undergraduate volunteers recruited from introductory psychology classes. In the first 3 experiments, subjects were told that they would be reading an essay written by a college sophomore. Subjects were then either given no task to perform (control condition) or were given the task of writing signatures at varying levels of difficulty (i.e., low or minimal effort [4-6 signatures], moderate effort [12-16 signatures], or high effort [32 signatures]). Following completion of the task condition, subjects were asked to rate their expectation of the essay's quality in advance of reading it. Key findings of the studies were that: 1. Subjects who were required to expend moderate effort subsequently rated the anticipated quality of the essay more highly than did control subjects who were required to expend no effort.
2. Subjects assigned to the no-effort and low-effort conditions did not significantly differ in their ratings of anticipated essay quality because, the investigators posited, the low-effort level of difficulty was not sufficiently salient to cause a difference in perceived value. 3. Subjects assigned to the high-effort condition (32 signatures) rated the anticipated essay quality lower than did subjects assigned to the moderate effort condition because of the ceiling effect, according to the investigators; if a person expends a large amount of effort, "the person may be unable to discover aspects about a particular event that will compensate for the cost experience." 12 In the fourth experiment, instead of rating the anticipated quality of the essay without actually reading it, subjects read an essay of either low or high quality, following a task of 0 signatures, 6 signatures, or 20 signatures. All 6 conditions were randomly assigned. Results for the 20-signature group were compared with pooled results for the 0-and 6-signature groups combined. Confirming the ceiling effect, researchers found that higher effort (20 signatures) was associated with lower ratings of the low-quality essay (i.e., the high cost outweighed the value of a low-quality essay, invoking the ceiling effect). However, confirming the role of cost in setting expectations, the higher (20-signature) cost was also associated with higher ratings of the high-quality essay (i.e., a positive expectation was generated by the higher cost, without a ceiling effect because the essay was good). 12

Signaling Theory in Economics: Further Exploration of How Expectations Are Set
In the early 1970s, as social psychologists were analyzing the effects of cost on perceived value and "brand loyalty" (repeat sales), theoretical mathematical models in economics began to examine the same phenomenon from a different perspectivethat of the producer of goods or services. The signaling hypothesis was first advanced as a theory of labor-market economics by Michael Spence in a 1973 Nobel prize-winning paper. Signaling theory posits that the seller of a product, who holds more information than the prospective purchaser, will leverage that information asymmetry by sending "signals" about the value of the product. However, the signals might or might not accurately represent actual product quality. [13][14][15] For example, Spence argued that workers will acquire additional years of education to send a signal about the quality of their work, prompting a response from a prospective employer (a higher wage) even if the increased education does not actually result in better productivity. 13 Signaling theory suggests that, in making purchase decisions, individuals may rely on multiple sources of information about product quality, including price, brand name, recommendations of friends, previous experience, warranties, advertisements, and product packaging. 14 Thus, like psychological theories of cost and value, signaling theory holds that the role of price in pur-chasing behavior is complex. Specifically, the recognition that price represents not only the cost to the consumer (i.e., a price increase would tend to reduce purchasing) but also a potential signal of quality (i.e., a price increase would tend to increase purchasing) leads to an understanding that the 2 effects of price are in conflict, making "price responsiveness more inelastic than would otherwise be the case." 14

Behavioral Economics Identifies Additional Irrational Responses to Price
In recent years, the field of behavioral economics has come to the fore, rooted in the belief that many of the assumptions of traditional economics are demonstrably incorrect in realistic studies of human economic action (e.g., purchasing goods, making job choices). Daniel Kahneman, winner of a 2002 Nobel Prize for his groundbreaking work in behavioral economics, explained the field in a recent interview: "Standard economics is mostly a mathematical discipline. It makes assumptions, and one [assumption] routinely made is that economic agents are rational. Behavioral economics is simply economics without the rationality assumption. Economists find it very difficult to give up the assumption, but [those who do] … can get to a richer and more realistic model of how people behave." 16 For example, a notable exception to psychological rules about the relationship between cost and value is the zero-cost product. Consumers are innately drawn to "free" products, even at the cost of purchasing higher priced goods to get what is "free," such as spending tens of thousands of dollars more on a high-end automobile to get a year of "free" oil changes. 17 To test the power of "free" goods, behavioral economist Dan Ariely conducted a clever experiment in which he and his associates set a table laden with chocolates-fine Lindt truffles on one side and Hershey's Kisses on the other-in a public place. In the first phase of Ariely's experiment, he priced the Lindt truffles at 15 cents and the Kisses at 1 cent. Those who purchased the chocolates acted, as a group, in an economically rational way; 73% chose the truffles and the remaining 27% chose the Kiss. In the second phase of the experiment, Ariely maintained the same 14-cent price differential but this time he offered the truffles for 14 cents and the Kisses at no charge. Acting irrationally in response to the "free" label, only 31% of customers chose the truffles, and 69% chose the free Kiss. 17 A similarly powerful and irrational effect, well known to product marketers, is price relativity, a process by which consumers compare prices relative to each other or to a price "anchor" (a ceiling or floor price value established in the mind of the consumer). For example, Ariely points out, restaurant menu designers will place the dish that they most want to sell at the second-highest price on the menu, knowing that customers are unlikely to purchase the highest-priced item but will evaluate the remaining menu items against the highest price. 17 Similarly, retailers will present price lists arrayed in order, with the item that they would most like to sell priced at a mid-range between highest and lowest price. 17 A guide for start-up restaurant owners, written by a menu pricing consultant, openly acknowledges that sound pricing strategy is rooted in an understanding of economic irrationality: "Customers will come in with 'reference' prices that they expect to pay for certain items and will not think twice about paying $1.50 for a glass of iced tea that has a cost of about a nickel …" 18 Similarly, retailers use "odd cents" pricing to encourage the illusion that a cost is lower than it actually is. For example, items are priced at $9.95 with the understanding that consumers will tend to round to $9 even though technically, in an economically rational world, it is understood that 9.95 rounds to 10. 18 "When incremental increases move the item to the next highest price," notes the restaurant pricing consultant, "(e.g., $8.25 to $8.50), [the change] is rarely detected by the customer. It's a way to gain pennies without losing customers." 18 Advertising has also been identified by signaling theorists as having an irrational, but often powerful, influence on purchasing. 15 Pointing out that television advertisements frequently contain no information at all about a product except that it exists, economists Paul Milgrom and John Roberts note that "the clearest message [the advertisements] carry is 'We are spending an astronomical amount of money on this ad campaign.' " 15 Although their observation was somewhat tongue in cheek, one theorist has posited that the mere fact that a product is advertised at all is sometimes seen by consumers as a signal of higher product quality. 15

Pulling the Pieces Together from Psychology and Pharmacoeconomics to Inform Us About Pharmacy Benefit Design
Controlled studies across the disciplines of psychology, economics, and pharmacoeconomics have produced remarkably similar guidance about the effects of prescription drug cost-sharing on medication purchasing behavior (Table). To optimize clinical and economic outcomes requires incorporating this multidisciplinary understanding into the testing and implementation of innovations in pharmacy benefit designs:

Human economic behavior is not entirely rational.
Research conducted over the past 6 decades has produced a growing awareness that human beings do not always make the most objectively healthy or cost-effective choices; in other words, the empirically measured value of a behavior or treatment does not consistently equate to its perceived value. This is not to say that human beings are unintelligent, merely that their personal preferences might not always be what they would be in a world of perfect information and decision making based solely on evidence. Rather than ignore this reality of human nature, benefit designers must live with it, overcome it as much as possible, and capitalize on it when feasible. Pharmacy benefit designers should be aware that, in promoting objectively healthy choices, influencing the perceived value of a medication may be an essential-and relatively inexpensive-way to encourage both cost-effective medication choices and adherence to medication therapy.

Summary
Pharmacoeconomic Research

Psychological and Behavioral Economic Research
Typical cost-sharing increases in commercially insured populations produce no deleterious effects.
In studies using controlled designs, typical copayment increases (i.e., from $5 to $13 for brand medications) produced modest impacts on utilization overall and little or no impact on chronic medication adherence. 19 • Moderate cost sharing encourages higher perceived value. 8,9,11,12 • Cost differences do not produce changes in perceived value unless they are large enough to be salient. 9,11,12 • Higher-priced drugs are perceived as more effective than discount drugs, even when the "drug" tested is a placebo. 4 Unusually high cost-sharing changes are potentially deleterious, especially among persons who are low income or have serious chronic illnesses.
In studies using controlled designs, only unusually high copayment changes (i.e., $23 to $25) or changes from very atypical cost-sharing arrangements (e.g., $0 copay or single-tier) produced reductions in medication use; however, even these studies documented inconsistent effects. 19 • If a cost difference exceeds the "ceiling effect," (the actual value of the product), the product may become devalued in the view of the consumer. 9,12 The effect of offering "free" services as an inducement for desired behaviors (e.g., switching to a lower-cost therapeutically equivalent medication) should be tested.
In controlled studies, mixed effects have followed increases in OOP cost share for patients accustomed to free medication. 19 Only 2 studies have examined the effects of providing free health care services; results of 1 study were unclear, the other found that free services shifted costs to the health plan without improving adherence. [22][23][24] • Offering "free" products or services is an often used and powerful marketing tool. 17 • The effect of using this tool in pharmacy benefit design is unknown.
OOP = out-of-pocket. (Table). To date, there is no empirical support for the strategy of reducing medi cation copayments to increase adherence with chronic medication therapy. The relationship between price and purchasing behavior is clearly complex, belying the simplistic assumption that copayment reductions will ipso facto translate to increased compliance with prescription medications. Psychological and behavioral studies suggest that paying a moderate cost up front is associated with subsequently higher perceived value and increased purchasing loyalty, with the exception of situations in which costs have reached a "ceiling effect" (a cost so high that it is not feasible for a product's value to equal its cost). 4,8,9,11,12 Perhaps more importantly, these studies suggest that unless a cost difference is salient (noticeable to the consumer), it will not affect purchasing behavior. 9,12 Results of these psychological and behavioral studies are completely consistent with findings of pharmacoeconomic studies of prescription drug cost sharing to date. In controlled studies of commercially insured populations (i.e., not low income, not publicly insured), only unusually salient or large copayment changes (e.g., a change from a 1-tier to 3-tier design coupled with a $23 non-formulary brand increase in one study, increases of up to $25 in another study) have been associated with decreased chronic medication adherence, and these studies employed unusual or questionable methods. [19][20][21] Controlled studies of typical amounts of change in prescription drug cost-sharing levels (e.g., change amounts ranging from $5 to $13 per 30-day supply for brand medications) have documented very modest effects on utilization overall and little or no impact on adherence to chronic medications. 19 The reduced rate of growth in net payer prescription drug cost observed in controlled research was primarily attributable to increased shifting of cost from payer to patient and, to a lesser extent, a shifting of utilization from non-formulary to formulary brand and generic medications. 19 3

. The body of economic and psychological research to date suggests that copayment reduction strategies may tend to increase the rate and cost of unnecessary brand medication use.
Waber et al.'s findings suggest that simply knowing of a drug's higher cost or "brand" status may increase its perceived value or, in the language of signaling theory, send a signal to the consumer that it is a better product (even if it isn't). 4 Signaling theory would also suggest that advertising, such as marketing of drugs directly to consumers, plays a role in encouraging consumers to believe that brand drugs are of higher quality than generic drugs. 15 PECT would suggest that, in copayment reduction initiatives, these differences in perceived quality could interact with lower OOP cost to modify drug selection in undesirable ways. Specifically, PECT indicates that if a brand-generic copayment differential is so small that it is not salient to the consumer, there is no reason for the consumer to prefer a generic drug. 12 Additionally, if the generic drug is perceived as lower quality than What Pharmacy Benefit Designers Need to Know About Perception and Reality: Never Forget the Elephant in the Pharmacy the brand drug, the "ceiling effect" (the limit to the amount that the consumer is willing to pay for it) is more easily invoked for the generic than for the brand. 12 Thus, the combination of perceived higher quality and lower OOP cost for brand drugs has the potential to shift use away from generic drugs, even when brands and generics are objectively clinically equivalent.
These psychological and economic research findings have 3 implications for pharmacy benefit design today. First, studies of copayment reductions should include assessments of change in generic dispensing ratio and claims volume (e.g., tier-1 claims per member per month). Second, while we await research results, payers should be very cautious in reducing brand-generic copayment differentials. Third, strategies that successfully encourage a positive perception of generic medications should be seriously considered as an approach that has the potential to be more cost-effective (i.e., to deliver equal or greater benefits at lower cost) than copayment reduction strategies.

Studies are needed to test the effect of "free" medication in encouraging specific desired behaviors (e.g., switch to a generic medication).
The power of "free" is the sole potential exception to the present lack of evidence to support prescription drug copayment reduction. Psychological and behavioral studies suggest that providing a service free of charge has a strong incentive effect on human behavior. 17 Notably, however, the only study to report this type of intervention in health care found that providing glucose test strips free of charge to patients with diabetes "shifted costs from patient to health plan, without improving adherence" in blood glucose monitoring. 22 Unfortunately, the present literature comes up short in providing the quantitative information that benefit designers need about the effects of providing free medication on clinical and economic outcomes. A recent highly publicized study by Chernew et al. of reduction in the amount of prescription drug cost sharing included an undisclosed number of patients whose medication was provided free of charge, but its design was weak and not transparent, the results for the "free" subgroup were not reported separately, the cost of the copayment intervention was not reported at all, and the observed effects of reduced cost sharing on medication possession ratio (adherence) across all copayment levels were statistically significant but not clinically significant at 7 to 14 days per year. 23,24 5. Benefit designers must test not just objective benefit design conditions but also the effects of messaging-how those conditions are described to plan members. In a world in which patient expectations and perceptions are often the most important factors in determining the success of an intervention, it is critical that studies of insured benefit changes (e.g., copayments, tiers, formularies) include tests of different messaging strategies or "quality cues," to use Waber et al.'s term, 4 to accompany the change. For example, members in a group with a copayment increase might be randomly assigned to 1 of 4 messaging subgroups: (1) education about the thera peutic equivalency and reduced OOP cost for generic medications, (2) therapeutic equivalency education only, (3) OOP cost education only, and (4) no education.
6. Messaging suggesting a "bargain" may be particularly effective. Given recent research demonstrating that patients may value higher-cost medications based solely on knowledge of their price, communication that effectively describes generic medications as a bargain-the receipt of a higher-price medication at a lower cost-has the potential to promote therapeutic switches, thereby lowering both payer outlays and consumer OOP cost. Similarly, communications that effectively describe improved health as a bargain relative to the OOP cost for prescription drugs have the potential to improve adherence by overcoming the ceiling effect. The importance of salience, as documented in psychological studies, suggests that attractive coupons or other creative communications approaches might work better than less noticeable differences in OOP cost at the point of sale.

Strong research designs are critical.
Across all disciplines, studies with strong research designs (e.g., the very strong randomized designs of psychological and behavioral research and quasiexperimental designs in pharmacoeconomic research) have produced markedly similar findings about the relationship between cost paid and perceived value. Specifically, controlled studies in these disciplines all suggest that purchases of prescription medications are predicted to be (psychological and behavioral studies) and are (well-controlled pharmacoeconomic studies) relatively price inelastic (not price sensitive), unless copayment changes are extreme, or there is a real issue with affordability (as in low-income or publicly insured populations). 19 In contrast, pharmacoeconomic studies with weak cross-sectional designs have found price elasticity in the purchasing of prescription drugs. The discrepancy between well controlled and weakly controlled work is probably attributable to the effect of confounding factors on weakly designed studies. That is, plans with higher prescription drug copayments often are characterized by other features that tend to reduce costs (e.g., differences in organizational culture, history of cost-conscious behavior, step-therapy requirements, or formulary differences). When these plans are compared with lower copayment plans in non-randomized designs, what appears to be an effect of cost sharing actually may be an effect of other unmeasured factors. Thus, it is critical that future research in prescription drug cost sharing and benefits design messaging should employ study designs that include randomization or pseudo-randomization with comparable study groups.

Paying for the Elephant in the Pharmacy-Not Just Peanuts
Recent popular press coverage indicates that several pharmacy benefits managers (PBMs) are engaged in either considering or developing interventions to educate consumers about the benefits of generic medications. 25 One PBM recently reported that, after witnessing the failure of a generic switch promotion program based solely on economic incentives, it began using behavioral economic principles to encourage therapeutic switching from brand Lipitor to generic simvastatin. Although this analysis has not yet been published, the PBM announced that its change in messaging has resulted in a "doubling or tripling" of the switch rate, which was 8% prior to the behavioral intervention. 25 Peer-reviewed assessments of programs of this type, using strong research designs, are urgently needed.
Yet, no matter how complete our understanding of how human beings determine what to value, we are left with the fundamental nagging question of who should pay for the incremental cost that results when efforts to encourage economically rational decision making fail. "How do we deal with the fact that expensive medicine (the 50-cent aspirin) may make people feel better than cheaper medicine (the penny aspirin)?" asks Dan Ariely. "Do we indulge people's irrationality, thereby raising the costs of health care? Or do we insist that people get the cheapest generic drugs (and medical procedures) on the market," despite our understanding that mere knowledge of higher product cost might make the patient feel better? 17 Identification of irrational behaviors and determination of how to discourage them are the stuff of empirical investigation; determination of who should pay for irrationality is the stuff of philosophical debate. Yet, whether one's approach to health care is to encourage financial responsibility for personal choice (as in some market-based health care system proposals) or to attempt to guarantee equivalent outcomes irrespective of personal choice (as in some universal coverage proposals), the need for better information about choice is the same.
For a health care system that, in 2006, spent nearly 2% of its gross domestic product on prescription medications dispensed in community pharmacies, 26 "the elephant in the pharmacy" may represent the most important key to success or failure in the endeavor to make prescription drug therapy both high quality and affordable. We need to know the customer, and perhaps behavioral economics (i.e., without the rationality assumption), is part of our requisite education. With an armada of effective lowcost generic drugs ("gold") for most chronic diseases, perhaps our challenge in managed care is to make the value of this gold-the drugs within therapeutic classes that have similar clinical outcomes at lower cost-more real (salient) for health plan members. Understanding how to meet that challenge will likely require the investment of a little more "gold"-in high-quality, quantitative, and transparent research on the costs and benefits of benefit design interventions.